Monday, March 31, 2008

"I'm Shocked, Shocked"

Consumer advocacy group U.S. PIRG last week released "Campus Credit Card Trap," a survey of more than 1,500 students at 40 colleges in 14 states. More than half of the respondents reported using credit cards to help pay for books. Almost one quarter reported using them to help pay for tuition. Twenty five percent said they (or their parents) had paid at least one late fee.

George Miller (D-Calif.) Chair of the House Education & Labor Committee is shocked. "This report shows the extent to which credit card companies are using aggressive marketing tactics to take advantage of college students faced with increasing prices for tuition, textbooks, and other college-related expenses," Miller said a statement last week. Congress should make sure that students "are fully aware of their federal college loan borrowing options before turning to private loans and credit cards."

I wonder how Hon. Miller would react if he learned that credit card debt is dischargeable in bankruptcy but student loans are not. Shocked?

It's more like pick your poison. Credit card debt, although dischargable runs around 18-20% interest and worse especially if you don't make the minimum payments. A student loan will feature a lower interest rate but like a bad tattoo it's on you forever.

I don't think she's a rational actor, I think she's an actor going for what she is familiar and comfortable with. As a late teen she has been swiping a credit card for years, but she's never had to deal with the process of applying for a loan, etc. The credit card application process is much easier and less intimidating than the loan process, especially with vendors positioned at every street corner in college towns on moving-in weekend.